Vermont First-Time Home Buying Assistance Programs & Grants for 2022

Vermont First-Time Home Buying Guide

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    By Susan Guillory

    (Last Updated – 07/2022)

    The Green Mountain State is a nature lover’s paradise with forests, lakes, and mountains. Along with its natural beauty, it’s also the safest state in the country.

    No wonder then that the housing market has heated up: Home prices have risen 15.3% in the past year (May 2021-May 2022), according to Redfin, a real estate brokerage that analyzes housing market data.

    Home buyers can find the Vermont market challenging, since there are 40.8% fewer homes for sale now than there were in 2021. And they go fairly quick: In 2021,a home was on the market for a median of 56 days. In 2022, the median dropped to 39 days.

    The good news is, if you’re a first time home buyer in Vermont, there are state and federal programs to help you purchase your home. This home buying guide can help walk you through the process.

    Who Is Considered a First-Time Homebuyer in Vermont?

    You qualify if you’ve never owned a home, of course, but you are also considered a first-time homeowner in Vermont if you haven’t owned a house in the last three years. In addition, the U.S. Department of Housing and Urban Development (HUD) considers you a first-time home buyer if you’re a single parent who has only owned a home with a partner while married, or a displaced homemaker who has only owned a home with a spouse. Be sure to check with any home buying assistance program you’re considering, because requirements can differ.

    5 Vermont Programs for First-Time Homebuyers

    There are several state programs for the first time home buyer in Vermont. Many are designed for people with low incomes or those who don’t have good credit scores. The Vermont Housing Finance Agency (VHFA) offers a number of them.

    1. VHFA: MOVE and MOVE MCC

    The ADVANTAGE program offers 30-year, fixed-rate mortgage loans with 0% to 5% down payments (the lender will determine this). Borrowers can save up to $825 on Vermont Property Transfer Tax at closing.

    To qualify, you must meet purchase price and income limits and have a minimum credit score of 640.

    2. VHFA: ADVANTAGE

    Spruce Up offers first-time homebuyers a low-interest 30-year loan for both the purchase and rehabilitation of a home.

    Applicants must meet the First-Time Homebuyer Program requirements.

    3. VHFA: ASSIST Down Payment and Closing Cost Assistance

    VHFA’s ASSIST program offers a 0% interest loan with no monthly payments due on sale to help with down payment and closing costs, with a maximum loan amount of either $10,000 or $15,000 (based on income).

    To qualify, borrowers and non-borrowing spouses must be first-time homebuyers.

    4. VHFA: Mortgage Credit Certificate (MCC)

    Another program to consider is VHFA’s Mortgage Credit Certificate (MCC), which provides a Federal tax credit up to $2,000 for every year you live in your home and pay interest on the mortgage. This is available with the MOVE MCC program as well as non-VHFA mortgages.

    5. Champlain Housing Trust (CHT)

    If you’re interested in a home in Burlington, Vermont, check out the Champlain Housing Trust (CHT). It helps low- and moderate-income homebuyers purchase a duplex (with priority given to the first time home buyer in Vermont). The program provides down payment no-interest, deferred loans of $10,000.

    To qualify, you must be purchasing a property in Old North End, Lakeside, or King Street Neighborhoods. The property must be two, three, or four units, and must be your primary residence. For more information, contact Todd Rawlings, Housing Program Manager, at 802-652-4209 or [email protected].

    To determine how much a loan will cost you each month, use our mortgage calculator.

    How to Apply to Vermont Programs for First-Time Homebuyers

    You can choose from many types of mortgage loans. You can also apply to the programs we’ve discussed for the first-time home buyer in Vermont. Just be sure to check the requirements before applying. Many ask you to connect with a partnering lender to apply for the program.

    Federal Programs for First-Time Homebuyers

    Several federal government programs are designed for people who have low credit scores or limited cash for a down payment. Although most of these programs are available to repeat homeowners, they can be especially helpful to people who are buying a first home or who haven’t owned a home in several years.

    These mortgages are generally for single-family homes, two- to four-unit properties that will be owner occupied, approved condos, townhomes, planned unit developments, and some manufactured homes.

    Federal Housing Administration (FHA) Loans

    The FHA, which is part of HUD, insures mortgages for borrowers with lower credit scores. Homebuyers choose from a list of approved lenders that participate in the program. Loans have competitive interest rates and require a down payment of 3.5% of the purchase price for borrowers with FICO® credit scores of 580 or higher. Those with scores as low as 500 must put at least 10% down.

    Gift money for the down payment is allowed from certain donors and will be documented in a gift letter for the mortgage.

    FHA loans always require mortgage insurance: a 1.75% upfront fee and annual premiums for the life of the loan, unless you make a down payment of at least 10%, which allows the removal of mortgage insurance after 11 years. You can learn more about FHA loans in general and FHA lending limits in Vermont by county here .

    Freddie Mac Home Possible Mortgages

    Very low- and low-income borrowers may make a 3% down payment on a Home Possible® mortgage. These loans allow various sources for down payments, including co-borrowers, family gifts, employer assistance, secondary financing, and sweat equity.

    The Home Possible mortgage is for buyers who have a credit score of at least 660.

    Once you pay 20% of your loan, the Home Possible mortgage insurance will be canceled, which will lower your mortgage payments.

    Fannie Mae HomeReady Mortgages

    Fannie Mae, or formally, the Federal National Mortgage Association, is a publicly traded government-sponsored enterprise that dates back to the Great Depression.

    Fannie Mae HomeReady® Mortgages allow down payments as low as 3% for low-income borrowers. Applicants generally need a credit score of at least 620; pricing may be better for credit scores of 680 and above. Like the Freddie Mac program, HomeReady loans allow flexibility for down payment financing, such as gifts and grants.

    For income limits, a comparison to an FHA loan, and other information, go to this Fannie Mae site .

    Fannie Mae Standard 97 LTV Loan

    The conventional 97 LTV loan is for first-time homebuyers of any income level who have a credit score of at least 620 and meet debt-to-income criteria. The 97% loan-to-value mortgage requires 3% down. Borrowers can get down payment and closing cost assistance from third-party sources.

    Unlike an FHA loan, the 97 LTV loan has no upfront mortgage insurance fee and does have cancellable mortgage insurance. The loan is for just one-unit single-family homes, co-ops, condos, and planned unit developments.

    Department of Veterans Affairs (VA) Loans

    Active-duty members of the military, veterans, and eligible family members may apply for loans backed by the Department of Veterans Affairs. VA loans, to buy, build, or improve homes, have lower interest rates than most other mortgages and don’t require a down payment. For most applicants, there is a one-time funding fee that can be rolled into the mortgage.

    Regional loan centers are closed to the public, but you can contact the Department of Veterans Affairs for Vermont at [email protected].

    Native American Veteran Direct Loans (NADLs)

    Eligible Native American veterans and their spouses may use these no-down-payment loans to buy, improve, or build a home on federal trust land. Unlike VA loans listed above, the Department of Veterans Affairs is the mortgage lender on NADLs. The VA requires no mortgage insurance, but it does charge a funding fee.

    U.S. Department of Agriculture (USDA) Loans

    No down payment is required on these loans to moderate-income borrowers that are guaranteed by the USDA in specified rural areas. Borrowers pay an upfront guarantee fee and an annual fee that serves as mortgage insurance.

    The USDA also directly issues loans to low- and very low-income people. For loan basics and income and property eligibility, head to this USDA site .

    HUD Good Neighbor Next Door Program

    This program helps police officers, firefighters, emergency medical technicians, and teachers qualify for mortgages in the areas they serve. Borrowers can receive 50% off a home in what HUD calls a “revitalization area.” They must live in the home for at least three years. You can reach the Burlington Field Office of HUD at 802-951-6290.

    First-Time Homebuyer Stats for 2022

    •  First-time homebuyers nationwide: 34% of all buyers

    •  Median age of first-time homebuyers in U.S. 33

    •  Average down payment in Vermont (20%): $75,800

    •  Average home price in Vermont (Redfin, June 2022):$397,000

    •  Average credit score of home buyer in Vermont: 736

    Financing Tips for First-Time Homebuyers

    As you learn about mortgage basics and how to choose mortgage term loans, you may want to also learn how to lower your mortgage payment. Here are some tips that can help.

    •  Traditional IRA withdrawals. The IRS allows qualifying first-time homebuyers a one-time, penalty-free withdrawal of up to $10,000 from their IRA if the money is used to buy, build, or rebuild a home. The IRS considers anyone who has not owned a primary residence in the past three years a first-time homebuyer. You will still owe income tax on the IRA withdrawal. If you’re married and your spouse has an IRA, they may also make a penalty-free withdrawal of $10,000 to purchase a home. The downside, of course, is that large withdrawals may jeopardize your retirement savings.

    •  Roth IRA withdrawals. Because Roth IRA contributions are made with after-tax money, the IRS allows tax- and penalty-free withdrawals of contributions for any reason as long as you’ve held the account for five years. You may also withdraw up to $10,000 in earnings from your Roth IRA without paying taxes or penalties if you are a qualifying first-time homebuyer and you have had the account for five years. With accounts held for less than five years, homebuyers will pay income tax on earnings withdrawn.

    •  401(k) loans. If your employer allows borrowing from the 401(k) plan that it sponsors, you may consider taking a loan against the 401(k) account to help finance your home purchase. With most plans, you can borrow up to 50% of your 401(k) balance, up to $50,000, without incurring taxes or penalties. You pay interest on the loan, which is paid into your 401(k) account. You usually have to pay back the loan within five years, but if you’re using the money to buy a house, you may have up to 15 years to repay.

    •  State and local down payment assistance programs. Usually offered at the regional or county level, these programs provide flexible second mortgages for first-time buyers looking into how to afford a down payment.

    •  The mortgage credit certificate program. First-time homeowners and those who buy in targeted areas can claim a portion of their mortgage interest as a tax credit, up to $2,000. Any additional interest paid can still be used as an itemized deduction. To qualify for the credit, you must be a first-time homebuyer, live in the home, and meet income and purchase price requirements, which vary by state. If you refinance, the credit disappears, and if you sell the house before nine years, you may have to pay some of the tax credit back. There are fees associated with applying for and receiving the mortgage credit certificate that vary by state. Often the savings from the lifetime of the credit can outweigh these fees.

    •  Your employer. Your employer may offer access to lower-cost lenders and real estate agents in your area, as well as home buying education courses.

    •  Your lender. Always ask your lender about any first-time homebuyer grant or down payment assistance programs available from government, nonprofit, and community organizations in your area.

    Use this home affordability calculator to understand how much you can afford to pay for a home in Vermont.

    The Takeaway

    The housing market in Vermont can be challenging, but as a first time home buyer, there are many state and federal programs available that can help you achieve your goal.

    Make your dream of being a homeowner come true with SoFi’s competitive mortgage rates and down payments as low as 3% for qualifying first-time homebuyers.

    View your rate


    FAQ

    Should I take first-time homebuyer classes?

    Yes! Good information is key to a successful home-buying experience for anyone, but especially for newcomers, who can easily be overwhelmed by the jargon, technicalities, and magnitude of applying for a mortgage and purchasing a home. First-time homebuyer classes can help. Indeed they are required for some government-sponsored loan programs.

    Do first-time homebuyers with bad credit qualify for homeownership assistance?

    Often they do. Many government and nonprofit homeowner assistance programs are available to people with low credit scores. And often, interest rates and other loan pricing are competitive with those of loans available to borrowers with higher credit scores. That said, almost any lending program has credit qualifications. That’s why it’s important to take all possible steps to improve your credit standing before you go house hunting.

    Is there a first-time homebuyer tax credit in Vermont?

    There is a mortgage credit certificate program for first-time homeowners and those who buy in targeted areas in Vermont. With it, you can claim a portion of your mortgage interest as a tax credit, up to $2,000.

    Is there a first-time veteran homebuyer assistance program in Vermont?

    Yes. The U.S. Department of Veterans Affairs offers home loans to service members, veterans, and eligible surviving spouses.

    What credit score do I need for first-time homebuyer assistance in Vermont?

    Credit score requirements vary, depending on the homebuyer assistance program. For example, for the VHFA MOVE and ADVANTAGE programs, you need a credit score of at least 640.

    What is the average age of first-time homebuyers in Vermont?

    The median age of first-time homebuyers in the U.S. is 33.


    Photo credit: iStock/haveseen
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